Do gasoline price shocks broaden into persistent inflation? evidence from U.S. prices

Abstract A conspicuous energy-price increase can raise headline inflation without initiating a persistent, generalized inflation process. This study asks when U.S. gasoline price increases remain relative-price movements and when they broaden into underlying inflation. The preferred measure is a Hamilton-style net gasoline price increase (NGPI), defined as the positive excess of the log real gasoline price over its preceding 36-month maximum. It avoids directly subtracting core inflation, although headline-CPI deflation retains indirect overlap with core prices and the measure remains reduced-form. Monthly local projections use January 2004–September 2025 shock dates, twelve lags, and predetermined controls. A one-standard-deviation increase is associated with a 0.115%-point rise in twelve-month headline inflation on impact and 0.218 point after three months. The headline response subsequently fades, and core CPI has no multiplicity-adjusted response across six measures estimated with identical controls and observations. Trimmed-mean PCE is more sensitive to positive-only gasoline changes. The non-energy diffusion response reaches 2.33% points at month 3 and 2.75 points at month 10, indicating temporary broadening. Five-year breakeven compensation moves mainly on impact, while a model-based expectation responds at several medium horizons. Elevated household expectations are associated most consistently with larger headline responses. Conditional core-inflation differences are less stable after multiplicity adjustment. The findings support limited average core-CPI transmission while identifying temporary breadth and specification-sensitive responses in other measures of underlying inflation.